New York University economist Nouriel Roubini says stocks will tumble another 20 percent, that cash is the safest place to be and that investors can use options to hedge against future market risk he is certain will come.

"There are some parts of the global economy that are now at the risk of a double-dip recession," Roubini says. "From here on I see things getting worse," says the head of Roubini Global Economics.

"What needs to be done is clear. We need to raise taxes and cut spending. Otherwise we're going to get a fiscal train wreck," he told CNBC. "It's going to take years of sacrifices."

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A slowdown in the U.S. economy coupled with weakness in the euro zone will cause price drops in both stocks and commodities and leaving little room for growth in most investment classes, Roubini says.

"There is that risk because the problems on the macro level are first in the euro zone,” he observes. “Then in China there is evidence of economic slowdown ... Japan is in trouble and U.S. economic growth is going to slow down.”

“There is also regulatory risk because we don't know how financial reform is going to occur."

Other than cash, Roubini suggests investing in short-term government bonds of countries that don't have a serious debt problem, such as Germany and possibly Canada.

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German business confidence slipped marginally in May, it's first such decline since February, as worries about the debt crisis weighed on financial markets and left the euro reeling.

The Ifo Institute for Economic Research said its business climate index fell to 101.5 points from 101.6 points in April on worries by Germany's retailers and wholesalers.